Some Thoughts for a Successful Bicycle Business
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1. Take in more money than you spend.
This seemingly simple thought is the most-often violated in business. Did you know that one out of every four women who start a business fail? But wait, four out of every five men fail in business! The usual reason: They spent more than they took in. Keep this simple rule foremost in your mind in every decision you make, and you'll do alright. The total amount of money you take in is called "gross sales," or "gross." The money you spend to keep your business going is called "overhead." Overhead would include rent, phone bills, and electricity. The other big "expense" in business is the cost of "inventory" - the tangible goods that you sell. What's left over after expenses is "profit." You can take all your profit home, and if you are lucky, your business will continue making about the same amount of profit. It is better to invest some of your profit in business growth.
2. The healthiest business is a steadily growing business.
When things are going great is the best time to insure the ongoing health of your business. Growth insures room for surprises such as a new competitor, a supply shortage, or a change in buying trends.
3. Ego can spoil your plans.
One of the main reasons people spend more than they take in is that they feel a need to 'keep up with the Jones.' This is an ego-driven situation that can be avoided. For instance, your friend has an air compressor, and she isn't even in the bicycle business. You do not need an air compressor at this time.
4. When you are starting out, every expense should be weighed against the potential profit.
When confronted with several choices as to how to spend your money, invest in the most secure and profitable one first.
5. Watch money leaks in your overheads.
Sure, you'll need to use some electricity, and will probably want to have insurance when your business grows, but look at everything that costs you more than $25 per month and see if it can be reduced or eliminated. Do you really need two phone lines? Can you purchase your welding tanks rather than renting? Do you need a newspaper subscription? Every $25 per month that you save gives you $300 more per year to invest in inventory, etc. The very biggest leak in most bicycle businesses is unneeded hired help. Anything that you can do yourself, do.
6. In bicycle businesses, virtually all advertising that costs money will turn out to be unprofitable.
In other words, if you pay $30 per week for a classified ad in the newspaper, it is very unlikely to increase your profit by $30/week. The only exception to the rule is yellow pages advertising. If you do place an ad in the yellow pages, make sure that it is the phone book that people use. There are often several phone books in many communities, but usually one is considered the "official" one. An ad elsewhere will seldom be seen.
7. Another form of advertising that can work is novelty advertising.
Give people something to talk about. Talk is the very most effective way to grow your business. So, have combs, pens, tape measures, and other useful little gadgets custom imprinted with your business name, phone number, and possibly address and a slogan. Give them to your customers, and watch your reputation spread. I particularly like this advertising expense because everyone gains something useful.
8. Better yet is eccentric publicity.
If you can do something different in your business that people will talk about in a positive way, you will find the results very profitable. You can sponsor the local unicycle club (and ride with them). You can do free safety checks on Sunday afternoons. You can have a miniature museum of antique bicycles in your store. You get the idea. I told this to one fellow, and he said he was going to give away free water bottles with every new bike sold. He just didn't get it! When you do something different, not only do people talk about you, but articles will be written about you in the newspaper, and you may be invited to speak on radio shows, or be interviewed on TV. This is extremely more effective than advertising, and it costs nothing.
9. Unless you have money to burn, start out small, and grow.
Build your business with your profits. This way if your business should fail to grow, it will be fairly painless. You can also try again. Since so many new businesses do fail, you improve your chances of success greatly if you are in a position to try two, three, or more times until you get everything right.
9. Stick to what you know.
Few things are worse for business than giving incorrect technical information, or taking on repairs or customizations that you are not yet qualified to do. Stay focused. Although there may be exceptions to this rule, generally you want to stick to your specialty. This will cause customers to seek you out, because you are the expert, or known for having the most inventory in your field.
10. Treat your customers like royalty.
If you treat a customer well, he is not likely to go out and tell everyone how wonderful you are. But if you treat a customer badly, he is likely to tell 40 friends that they should not do business with you. Your shop might be the only one in town with a good reputation!
11. Keep your quantities low, so you can keep your variety high.
Order frequently but in small quantities. Customers will come back time and again if they know you are likely to have whatever they need. Since your money is likely to be limited at the beginning, order just a few of each item, but lots of different items. But, you have to balance this with the cost of running out of key items, and the cost of time spent placing orders. And, although most bicycle wholesalers will sell small quantities of most things, the price is usually a bit higher than buying a dozen or more at a time. However, the small extra cost is easily offset by having what your customers want as often as possible. It is very important to find as many suppliers as you can. I was recently in a store looking at foam handlebar covers. There were two prices in the pile of the identical item, $8.49 and $2.19. This shows that they were ordered at two separate times from two different suppliers. Had the clerk been really sharp, they would have noticed the widely differing prices, and ordered only from the low-price supplier. It is not uncommon to see the retailer with six or eight catalogs open at once, and placing multiple orders, filling in lists for each supplier's best prices.
12. Have fun!
- Jeff -
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